Israeli tycoon Arnon Milchan is the billionaire Hollywood producer behind Pretty Woman. He was also a secret agent who helped Israel and South Africa broker deals trading nuclear material for propaganda assistance. An excerpt from the forthcoming Confidential.
In June 1975, Arnon Milchan, an Israeli who is today a billionaire  Hollywood producer, the man behind Pretty Woman, The King of Comedy, and Mr. & Mrs. Smith, was invited by his friend Shimon Peres, then defense minister in Israeli Prime Minister Yitzhak Rabin’s government, to one of the strangest meetings in his life. He was asked to participate in a tempting scheme to help his country.
First, some backstory . Until 1973, Jerusalem had consciously kept relations with South Africa on the back burner to avoid offending friendly black-majority African states. There was genuine opposition within Israel to the philosophy of apartheid, and the two countries didn’t even maintain full diplomatic relations at the ambassadorial level. But none of that was enough for African countries to overcome Arab pressure to sever relations with the Jewish state following the Yom Kippur War. Israel’s isolation in Africa was virtually complete by the end of 1973.
For South Africa, the situation was just as bleak. Anti-apartheid sentiment was on the rise around the world and widespread violence had broken out at home. By November 1973, the United Nations had declared apartheid to be a “crime against humanity”; economic boycotts and arms embargos would ensue. Even South African athletes were to be prohibited from international competition. And it was about to get worse.
Unlike many of its African neighbors, who abandoned Israel at the first real test of their relationship, South Africa came to Israel’s aid in its desperate hour in 1973. More than 1,500 South Africans—mostly Jews—volunteered to fight for Israel, and the Pretoria government permitted over $30 million in aid to be sent to Israel.
But following the Yom Kippur War, as the harsh reality of international isolation set in for both countries, perhaps it was inevitable, as a matter of self-preservation, that they would drift together. And in June 1975, Oscar Hurwitz, a prominent Jewish-South African businessman and architect, facilitated a meeting in Israel the primary objective of which was to cultivate a new relationship between the two countries.
The South African delegation arrived under a heavy fog of secrecy. At its head stood Interior Minister Connie Mulder, a rising star in South African politics. He was accompanied by General Hendrik van den Bergh, head of South Africa’s Bureau of State Security, and maverick Information Secretary Eschel Rhoodie. The mission circumvented South Africa’s Foreign Ministry, which they all viewed as lazy, bureaucratic, and ineffective.
They candidly discussed South Africa’s difficult predicament, revealed a top-secret, five-year plan, approved by Prime Minister B.J. Vorster, to attempt to influence world opinion in favor of the South African apartheid regime, and asked for Israeli participation in a “consultative role.” Specifically, they asked Rabin and Peres to appoint an individual to join a secret group known as the Club of Ten, which consisted of 10 key individuals from 10 different countries. These anonymous representatives would do everything possible to undermine embargos and boycotts, and enhance the image of South Africa, by purchasing or influencing international media outlets.
The members of the Club of Ten were carefully chosen for their cupidity, connections, drive, competence, and proven ability to get things done. They would operate in secret, collaborating directly with Rhoodie’s information ministry. Rhoodie had already established a front company named Thor Communicators to coordinate and fund activities, which in Israel’s case, would also mean coordinating a plan to strengthen South African-Israeli relations, codenamed Operation David. The operation would handle everything from South African cultural and sports exchanges with Israel, to secret defense deals and nuclear collaboration.
The project was designed as a fully funded psychological war, in which no government oversight or regulations of any kind would be applied. “You should keep your paperwork to an absolute minimum and anything not necessary should be destroyed. In fact, where you can do without documentation, you should do so,” Vorster, the South African prime minister, told Rhoodie, who was assigned to oversee the operation.
The secret enterprise would be funded to the tune of hundreds of millions of U.S. dollars, though the exact number will never be known because accounts were not kept. Funding would be off-budget, without parliamentary approval, from South Africa’s vast gold reserves in London. A large shipment of gold bars was transferred under heavy security from London to a bank vault in Zurich, where banking secrecy laws at the time were suitable to serve South Africa’s covert goals.
In exchange for military technology and covert public relations assistance from Israel, South Africa would open up an entire world of possibilities in defense contracts to the Jewish state, plus access to its vast natural resources, especially uranium. Somebody in Israel would need to be the designated point-person, joining the Club of Ten. That somebody would receive contracts and other potentially lucrative transactions.
Following the meeting with the South Africans, Rabin and Peres considered the matter carefully, weighing the risks and potential rewards. As relations with most African countries were now shattered, the need to maintain appearances vis-à-vis South Africa had all but disappeared, and U.S. Secretary of State Henry Kissinger had asked that Israel act as the U.S. proxy in support of South Africa’s battle against Communist forces in Angola.
Having just experienced the trauma of the Yom Kippur War, which had brought the state to the brink of destruction, the prevailing winds in Israel were that survival should take precedence over any other consideration. South Africa represented a large and wealthy market for potential Israeli arms sales, to keep Israel’s crucial and growing domestic defense industry humming. Most importantly, the relationship offered the prospect of a steady supply of uranium and nuclear testing locations for Israel, all of which was deeply seductive.
It was also troubling: Apartheid was an unpopular and unappealing philosophy. Furthermore, South Africa’s prime minister had been imprisoned as a Nazi sympathizer in his youth, and a voluntary U.N. arms embargo against South Africa had been in place since August 1963. But on balance, even these blemishes didn’t outweigh the potential benefits of a secret strategic alliance.
Every choice is between two imperfect alternatives, Peres reasoned with Rabin. Black South Africa was aligning with PLO chairman Yasser Arafat and with the Soviet Union, and against Israel. “But we shall never stop denouncing apartheid,” Peres said. “We will never agree to that.”
Rabin and Peres decided to sign on to Mulder and Rhoodie’s scheme. They knew who their operative would be: a dynamic individual who knew how to keep a secret, operate behind the scenes, and was not afraid of danger or averse to getting his hands dirty. That man was Arnon Milchan, and Peres moved immediately to arrange the meeting.
When Milchan arrived he was greeted warmly by Peres, who introduced him to Mulder, van den Burgh, and Rhoodie. David Kimche, a Mossad superagent who specialized in African affairs, was also present, and no introductions were necessary. They all exchanged pleasantries and sat for a quiet talk.
Peres informed his guests that Milchan was a trusted independent businessman who owned a fertilizer and agro-chemical company. He explained that Milchan had completed a number of important joint U.S.-Israeli projects in Iran and was handling a sizable portion of Israel’s defense procurements—a real go-getter.
Mulder and Rhoodie were surprised at how young Milchan was; he was just 30 years old. Rhoodie began to pepper Milchan with questions about his views on South Africa and the world in general. Milchan quickly disarmed the three South Africans with his trademark charm, wit, and youthful enthusiasm. Like most people who met him, they all took an instinctive and immediate liking to him.
The feeling was mutual. Although Rhoodie was in his 40s, he and Milchan quickly discovered that they shared a similar temperament. They were both athletic with a passion for tennis, and indeed would meet on the tennis court for years to come. They both appreciated the good life, fine wine, fine foods, women, and gaming. Both had a vivid imagination and both had a flair for pushing the limits of whatever they were involved in.
Rhoodie invited Milchan to South Africa to formalize the relationship, and thus began Milchan’s great South African adventure. Most of it is shrouded in secrecy, but enough is known about these activities to conclude with confidence that they were deep, extensive, covert, highly profitable and, in hindsight, highly controversial.
Milchan was never ideologically attracted to apartheid, and has since expressed regret at having worked to maintain the policy. His involvement was initiated by his own government in the larger interests of his country, and his activities can be divided into three primary categories: defense procurement, the propaganda war, and nuclear collaboration.
When Milchan arrived in South Africa for the first time, to his surprise, he was greeted like a head of state. “Rhoodie put on quite a show, and you couldn’t help but be impressed,” Milchan said. “Happy Africans were dancing to traditional drumbeats, and little African children presented him with traditional gifts; it was all picture-perfect,” and in great contrast to the realities of apartheid.
After the formalities, Milchan was whisked away to a luxury hotel in Johannesburg. During dinner, Rhoodie extended to him an item to study. It was Milchan’s crisp new South African passport, Rhoodie’s way of telling him that he was one of them now. Just like that.
Over dinner, Rhoodie filled him in on the game plan. Their mission was to identify important opinion-shapers in Western media and entertainment, such as journalists, cultural icons, and politicians, and target them for subtle recruitment to the South African cause through gentle persuasion, through bribery, or, if necessary, by buying controlling interests in entire media outlets.
The need for secrecy was obvious. The objective was not to promote apartheid directly, which Rhoodie understood was a losing proposition, but rather to stress the strategic value of South Africa in general to the free Western world: a country rich in minerals and threatened by the spread of Communist totalitarianism.
The following morning, Rhoodie and Milchan flew south toward Port Elizabeth, on South Africa’s coast. As the plane reached the Indian Ocean it banked west and flew along the beautiful Garden Route, on the Southern edge of the continent. They landed near the picturesque little town of Plettenberg Bay, with its golden white beaches. This was the South Africa that Rhoodie wanted Milchan to see—isolated, idyllic, peaceful, and safe.
Rhoodie informed Milchan that he had arranged for a permanent luxury apartment for him in Plenttenberg Bay, and that he should consider it his home in South Africa. As they lounged around in the new apartment, they delved deeper into the plan. In essence Milchan would play the same financial role for South Africa that he had played for Israeli intelligence. He would open secret bank accounts and spread the money around as guided by Rhoodie, with no South African fingerprints on it.
Things kicked into high gear quickly after Vorster’s official visit to Israel in 1976. At the core of his discussions with Rabin and Peres was the trade of Israeli weaponry and nuclear technologies for South African capital and raw material. The parties immediately agreed to the sale of mortars, electronic surveillance equipment, anti-guerrilla alarm systems, night-vision equipment, radars, patrol boats, Bell helicopters, armored vehicles, and howitzer artillery pieces. Israel would also supply South Africa with blueprints for its Kfir fighter jet, which were themselves based on stolen blueprints of the French Dassault-manufactured Super Mirage. The result was the South African Atlas Cheetah fighter. Of course, somebody had to supply the missiles for the Cheetah platform, and Raytheon, through Milchan, stepped up to the plate with the latest systems.
On Nov. 4, 1977, the U.N. Security Council adopted resolution 418  imposing a mandatory arms embargo on South Africa. Until then, the arms embargo had been voluntary; now the United Nations acted with uncharacteristic firmness, which meant that the United States and European countries would have to pretend to abide.
That put Israel and its covert operative Milchan in the ideal position to act as the middleman. Of course, on the surface, Israel would officially abide by U.N. resolution 418, but secretly, primarily through the services of companies established by Milchan, it would act as South Africa’s primary defense systems supplier, funneling millions of dollars for purchases from third parties and through direct sales of its own military industries. The timing of the embargo could not have been better for Milchan. He was already deeply plugged in to the rapidly emerging Israeli-South African alliance as Israel’s representative in the Club of Ten, and just as he’d enjoyed the princely insider track in Israel for years, he’d now operate similarly in South Africa, an even larger environment. Like a night flower, Milchan would flourish in the dark.
Western countries knowingly used third-country middlemen from around the world to trade with the lucrative South African market while publicly maintaining a posture of vocal opposition to apartheid. Virtually every diamond purchased in the Western world was mined in South Africa at the time and helped to comfortably finance the South African military machine. Oil from Arab countries flowed freely without regard for any embargo.
Israel feared the political and mostly symbolic implications of the embargo and found it advantageous to secretly undermine it. If the West could be pushed into endorsing an embargo against South Africa, no matter how ineffective, the thinking went, it might also be pushed into one against Israel. Therefore Israel would not adhere to it as a matter of policy, although publicly it would pay it full lip service.
Every imaginable weapons system needed by South Africa that could not be purchased directly from Israel was purchased on the international market, and instead of ending up in Israel as indicated on the final destination documentation, was diverted to South Africa. As with Israeli procurements, Milchan’s company quickly became the largest defense procurer for the South African government. But unlike his procurements for Israel, his commissions on his South African deals were pocketed by him and quickly became the largest source of his wealth—which would ultimately be parlayed into Hollywood blockbusters.
But as important and lucrative as defense systems were for Milchan personally, uranium was Israel’s primary obsession in its relations with South Africa. The initial feedstock for Israel’s reactor at Dimona had come from France; later supplies came from a series of covert LAKAM Isreali intelligence operations. Blumberg facilitated the purchase of the first 50-ton shipment of uranium oxide from South Africa, but the Israelis were looking for something even more serious than that.
They were looking for a nuclear testing ground. Israel was confident in the reliability of its first generation of nuclear weapons, which were French-tested. But following the Yom Kippur War, Israel had developed the neutron bomb involving much more sophisticated technology. That would require at least one confirming test.
In exchange for the transfer of sensitive nuclear technology, South Africa would finally agree to allow Israeli access to the wide-open space of the Kalahari Desert or the South Atlantic for the purpose of a nuclear test. The nuclear transfer came in the form of tritium. Van den Bergh was eager to procure 30 grams of tritium from Israel, enough for 12 atomic bombs. Tritium is used to increase the power of nuclear weapons by creating fusion for thermonuclear bombs.
In an operation codenamed “Teeblare,” “Tea Leaves” in Afrikaans, Israel delivered 12 shipments of tritium manufactured in Dimona to South Africa in tiny capsules, which contained 2.5 grams each. Benjamin Blumberg, Rhoodie, Milchan, and others served as escorts on the special C-130 Hercules flights carrying the capsules. These deals secured both the testing site and, over time, an additional 500 tons of uranium for Israel.
By August 1977 Israel was ready for an underground test at the new Kalahari Desert test site, but a few days earlier, on July 30, a Soviet reconnaissance satellite noticed the test preparations for what they assumed was a South African bomb. The Soviets forwarded their concern to Washington. Seven days later, a U.S. satellite confirmed the Soviet finding. Immediate protests were issued to South Africa by the U.S., British, French, and West German governments, and the test was abruptly scrapped at the last minute. It was a setback.
Sept. 22, 1979, was just another evening. There was, however, a terrible storm circulating in the extremely remote southwest region of the Indian Ocean—nothing unusual for that time of year. Thousands of miles away, the world’s largest radio telescope at Arecibo in Puerto Rico suddenly detected an anomaly, an electromagnetic ripple on the lower surface of the ionosphere emanating from the lower Atlantic/Indian Ocean region.
At the same time, an American Vela satellite detected a distinctive double flash. A few commercial fishermen in the area reported a large flash in the distance coming from the direction of Prince Edward Islands, located about 1,500 miles southeast of Plenttenberg Bay. Infrared sensor data indicated what looked like a nuclear explosion, probably an enhanced-radiation neutron bomb. The device was likely exploded on a barge, located near a ship-borne command post. It was probably detonated inside a steel container like a commercial vault.
The minds behind the operation had cleverly waited for the onset of a major South Indian Ocean storm before proceeding with the detonation. This would quickly wash radioactive evidence into the turbulent open sea. By the time snooping U.S. planes arrived on the scene to conduct atmospheric tests, the storm had already cleansed the evidence, and it would take days before a properly equipped ship would arrive on the scene with little if anything to find.
The sea was rough and the command ship maintained radio silence. It was packed with sophisticated electronics and sensors and was pitching violently. On board were numerous Israeli and South African scientists and technicians and the key facilitators of the secret nuclear relationship. They witnessed the flash with a little trepidation, but mostly with a sense of excitement.
Israel got its test. It was a substantial coup and one of the most secret operations ever conducted by Israel and the LAKAM, the details of which only began to emerge publicly years later, after the fall of the apartheid government of South Africa in 1995. It was a small 2 to 3 kiloton neutron bomb, which demonstrated a high level of sophistication.
United States security experts desperately scrambled to decipher the data, an effort that started immediately and lasted for months. Arguments over the interpretation of the data continued for years; most scientists and nuclear experts concluded with certainty that it was a nuclear explosion. President Jimmy Carter was in a difficult bind. By U.S. law, if the United States publicly confirmed that Israel was linked to a nuclear test, the president and Congress would be forced to act by the amended U.S. Foreign Assistance Act of 1961.
The law clearly states that countries acquiring or transferring nuclear weapons, material or technology outside of international nonproliferation regimes (such as the Nuclear Non-proliferation Treaty, to which Israel is not a signatory) would be prohibited from receiving any military or economic aid from the United States. That is the reason the United States has never publicly acknowledged Israel’s nuclear arsenal, and that is the reason that the 1979 test has remained shrouded in mystery and buried.
Arnon Milchan continued working on projects for the Club of Ten. “I acted at the request of my own country,” Milchan told us. But over time he experienced a gradual awakening to the realities of apartheid, which occurred on routine visits, when he was no longer accompanied by government minders. It was during those trips, when he took the opportunity to rent a jeep and explore well beyond the isolated areas of white privilege, that his eyes were opened. As he recounted in an interview with us in 2009:
I found myself face to face with the most extreme poverty that I had ever seen; I visited townships and little villages. The inequity that I witnessed was a life-changing experience. I was free to go wherever I wanted, and I realized that was not the case with the people I met along the way. It was a growing burden on my conscience. But there was one incident that broke the camel’s back. One day I visited a local zoo. At the entrance, I noticed a sign that stated “No Blacks or Asians Allowed.” It wasn’t the first sign like that that I had seen, but it suddenly occurred to me that I am an “Asian” and I took it personally in a way that I had not before that. I knew that it was more of a racial statement than one of geography, but I simply could not bring myself to enter.
I couldn’t help but think of the racism that my own immediate family had escaped from, or all of those who stayed behind in Europe and were murdered because of this type of prejudice.
That same night, he couldn’t sleep.
In the morning, he packed his bags and headed for the airport. He had made a personal decision to never step foot in that country again until apartheid was abolished, and that he’d do everything in his power to undermine it.
Joseph Gelman, a former consultant to a past president and chairman of AIPAC, lives in Las Vegas. Meir Doron is a Los Angeles-based journalist and editor. This excerpt is adapted from Confidential: The Life of Secret Agent Turned Hollywood Tycoon Arnon Milchan  by Meir Doron and Joseph Gelman to be published July 30 by Gefen Books. (E-book out now at 21st Street Books .) Copyright 2011 by Joseph Gelman and Meir Doron. Reprinted by permission.